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Charterhouse-backed retailer Vivarte breaches covenants

17 Jul 2013

euro8_170sqFrench private equity-backed retailer Vivarte has reportedly breached the terms of loans totalling €3.43bn.

The company was acquired by private equity firm Charterhouse Capital in 2007 in a deal backed by €3.43bn of loans, which were extended and amended in May last year pushing out the maturity of the debt by two years, said Reuters.

Vivarte has struggled due to a challenging macroeconomic environment and must now decide what to do with its debt pile, said the report, citing banking sources with direct knowledge of the matter.

The debt investors have been informed of the breach of leverage and interest covenants and Vivarte will announce in due course what it plans to do with its debt pile, said the bankers.

Charterhouse has 15 days to decide on providing €10m to €15m of equity to the business, which could be used to pay down debt along with the company’s cash reserves of €600m.

The cash on the balance sheet could reduce the company’s leverage to 6.3 times from the current level of 6.96 times, which means it would require more equity to get within the 6.05 leverage requirement.

Some of the bankers said Charterhouse could refrain from injecting equity into the business and allow it to operate in defauly with a full debt restructuring unlikely.

“Vivarte is a long way off from a debt for equity swap. There is still a lot of liquidity and value in the business,” said one of the sources.

Earlier this month it was reported that Charterhouse was looking to sell retail chain Card Factory to private equity buyers.

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